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contribution that exceeded the account limit for a reserve under
section 419A(c)(2).17 For the reasons set forth below, we disagree
with respondent’s assertion. To the contrary, we approve of the
Mercer method used in computing Norwest’s 1991 contribution to the
postretirement trust.
The parties rely on expert reports and testimony to explain
actuarial methods appropriate for computing a reserve for
postretirement medical benefits described in section 419A(c)(2) and
to compute the account limit using those methods. Petitioners
presented the reports and testimony of two expert witnesses:
Messrs. Ira Cohen and Gary Scharmer. Respondent presented the
expert report and testimony of Mr. Richard Daskais. The experts
generally agree that actuarial cost methods approved for computing
the funding of defined benefit pension plans may be used for
computing the funding of postretirement medical benefits.
1. Actuarial Cost Methods
In calculating reserves, actuaries first calculate the stream
of benefits to be paid from the trust (the year-by-year benefit
payments to be made to covered employees in future years) and then
calculate the present value of that stream by discounting the
payment each year at a determined interest or investment rate. The
stream of benefit payments is based on actuarial assumptions. For
postretirement medical benefits, these assumptions include those as
17 Respondent does not dispute the method petitioners used
for computing the contribution for the years 1992-94.
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